Robert Griffin, et al v. U.S. Trustee
MEMORANDUM OPINION AND ORDER affirming the decision of the Bankruptcy Court and dismissing the Appeal cc: Bankruptcy Clerk and Judge. Signed by Honorable P. K. Holmes, III on September 21, 2012. (rw)
IN THE UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF ARKANSAS
FORT SMITH DIVISION
ROBERT GRIFFIN AND JULIA GRIFFIN
Case No. 2:12-CV-02084
RICHARD L. COX, UNITED STATES TRUSTEE
MEMORANDUM OPINION AND ORDER
Currently before the Court is Appellants’ Robert and Julia Griffin’s Notice of Appeal (Doc.
1) of an order of the U.S. Bankruptcy Court for the Western District of Arkansas. Also before the
Court are Appellants’ Brief and supporting documents (Docs. 11-12); Appellee Arvest Bank’s Brief
and supporting documents (Docs. 23-25); and Trustee Richard L. Cox’s Brief (Doc. 27).
On June 18, 2012, this Court concluded that the February 7, 2012 order of the bankruptcy
court, which concerned a disputed credit claimed by Appellants and denied by Appellee, was final
for purposes of appellate review. The Court has jurisdiction to hear the appeal of this matter
pursuant to 28 U.S.C. § 158(a)(1) and Fed. R. Bankr. P. 8001(e).
This case stems from the Chapter 11 bankruptcies of Robert and Julia Griffin (“the Griffins”).
The Griffins hold a controlling interest in a number of companies that also declared bankruptcy,
including Silver Leaf East, LLC; Sabram Estates West, LLC; Stinson, Inc.; and The Plantation, LLC.
The legal issue that is the subject of the instant appeal has also been appealed to this Court by the
Silver Leaf East, LLC (Case No. 2:12-CV-2085); Sabram Estates West, LLC (Case No. 2:12-CV2086); Stinson, Inc. (Case No. 2:12-CV-2087); and The Plantation, LLC (Case No. 2:12-CV-2088).
The procedural posture and background facts for these five appeals, including the instant appeal, are
the same.1 Therefore, the ruling of this Court with regard to one of these cases will be applicable
to all of these cases. Consequently, in the course of this Memorandum Opinion and Order, the Court
will often refer collectively to the five appellants listed above, including Appellants Robert and Julia
Griffin, as “the Debtors,” and to the appellee in these appeals, which in all cases is Appellee Arvest
Bank, as “Arvest.”
The Debtors’ bankruptcies impacted financial obligations owed to Arvest. Arvest was the
only secured creditor of the companies owned by the Griffins, and the Griffins personally guaranteed
the companies’ debts. The Debtors’ five bankruptcy petitions were filed on September 8, 2010. On
October 29, 2010, Arvest filed a motion for relief from the Automatic Stay imposed during
bankruptcy proceedings, as set forth in 11 U.S.C. §362(a). The bankruptcy code’s Automatic Stay
provision creates a safe harbor for those individuals and entities going through the bankruptcy
process by temporarily halting the ability of creditors to collect against the bankrupt estates.
According to §362(a), filing a petition for bankruptcy
“operates as a stay, applicable to all entities, of –
(1) the commencement or continuation, including the issuance or employment of
process, of a judicial, administrative, or other action or proceeding against the debtor
that was or could have been commenced before the commencement of the case under
this title, or to recover a claim against the debtor that arose before the commencement
of the case under this title;
(2) the enforcement, against the debtor or against property of the estate, of a
judgment obtained before the commencement of the case under this title;
(3) any act to obtain possession of property of the estate or of property from the estate
The bankruptcy court grouped all five bankruptcies under the same case caption and
addressed orders collectively to the five “debtors-in-possession.”
or to exercise control over property of the estate;
(4) any act to create, perfect, or enforce any lien against property of the estate;
(5) any act to create, perfect, or enforce against property of the debtor any lien to the
extent that such lien secures a claim that arose before the commencement of the case
under this title;
(6) any act to collect, assess, or recover a claim against the debtor that arose before
the commencement of the case under this title;
(7) the setoff of any debt owing to the debtor that arose before the commencement
of the case under this title against any claim against the debtor; and
(8) the commencement or continuation of a proceeding before the United States Tax
Court concerning a tax liability of a debtor that is a corporation for a taxable period
the bankruptcy court may determine or concerning the tax liability of a debtor who
is an individual for a taxable period ending before the date of the order for relief
under this title.”
On December 14, 2010, the bankruptcy court issued an order on Arvest’s motion for relief
from the Automatic Stay. (Doc. 9-1). After conducting a telephonic hearing and receiving briefs
and evidence from counsel, the bankruptcy court granted Arvest’s motion in part by creating certain
conditions that the Debtors would be required to adhere to in order to continue to enjoy the
protection of the Automatic Stay. Specifically, three of the companies owned by the Griffins – The
Plantation, LLC; Sabram Estates West, LLC; and Silver Leaf East, LLC – were now required to
make certain monthly “protection” payments to Arvest so that all the Debtors could remain under
the umbrella of the Automatic Stay. Unless these monthly protection payments were made,
beginning on December 7, 2010, “and on the 7th day of each month thereafter until Debtor[s’] plan
of reorganization is confirmed,” the Automatic Stay would be removed and collection actions against
the bankrupt estates could commence. Id. at p. 2. The monthly protection payments were ordered
by the bankruptcy court “‘for cause’ . . . because Arvest Bank ha[d] been frustrated in its efforts to
collect payment of its loan to Debtor[s].” Id.
Approximately eight months after the protection payments began, the Debtors and Arvest
entered into a settlement agreement with an effective date of August 4, 2011. (Doc. 11-4). While
the parties were waiting for bankruptcy court approval of their settlement, the Debtors made the
unilateral decision to stop making protection payments to Arvest, reasoning that the need for such
payments was obviated by the parties’ agreement to the settlement. Arvest disagreed with the
Debtors on this point, and on August 16, 2011, Arvest brought a second motion for relief from the
Automatic Stay, alleging that Debtors were in violation of the court’s previous order for failing to
make a protection payment on August 7, 2011. (Doc. 12-2).
From that point onward, the issue of the monthly protection payments became a major source
of contention between the parties. The bankruptcy court conducted a hearing on Arvest’s second
motion for relief from the Automatic Stay on September 7, 2011, and during the hearing, an Arvest
officer named William Staed testified before the court. On cross-examination by the Debtors’
counsel, and over the objection of Arvest’s counsel, Mr. Staed “indicated a willingness” to apply the
protection payments made after the settlement was signed by the parties “as a credit to the settlement
agreement itself.” (Doc. 12-7, p. 27). However, later on in the hearing, Mr. Staed reiterated Arvest’s
position that it was “entitled to a continuance of the adequate protection payments until this
transaction is approved and consummated.” Id. at p. 51.
At the conclusion of the hearing, the bankruptcy court ruled from the bench that the Debtors
must continue to make all monthly protection payments “until this thing gets resolved.” Id. at p. 69.
Mr. Griffin tendered a check that very day to Arvest for August and September 2011's protection
payments. Id. at p. 73.
Approximately one month later, on October 17, 2011, the bankruptcy court approved the
parties’ settlement agreement. (Doc. 12-5). Unfortunately, court approval of the settlement
agreement did not signify the end of the parties’ conflicts, particularly with respect to the protection
payments. In an email dated October 13, 2011 (Doc. 24-3, p. 3), just before the settlement was
approved by the court, Arvest’s counsel stated to the Debtors’ counsel, “[s]o long as we get the
closing of the settlement done before November 7, 2011, Arvest does not expect future adequate
protection payments.” The Debtors’ counsel responded by email on the same date that the Debtors
did not expect to make protection payments in November or December of 2011. Id. at p. 4.
By October 31, 2011, the parties had not exchanged the documents or cash contemplated in
the settlement agreement. Arvest’s counsel, in a letter to Debtors’ counsel, reiterated the terms of
the settlement agreement and attached to his letter certain relevant documents that required the
Griffins’ signatures. (Doc. 12-6). In the letter, Arvest’s counsel averred that “[s]ubject to the
Debtors timely paying in full the above weed liens, Arvest will credit the Court Ordered payments
made after entering into the Settlement Agreement towards the cash payments . . . I would hope that
this is an agreeable compromise since Arvest has been more than reasonable in allowing any credit
for the Court Ordered payments. The amount of the three months of Court Ordered payments [for
August, September, and October 2011] totaled $42,406.89.” Id. Counsel closed the letter with a
deadline, November 2, 2011, the date by which the Griffins needed to have all documents notarized
and delivered to the Arvest branch in Fort Smith. Id.
As of November 3, 2011, the Debtors had still not executed and delivered to Arvest the
settlement documents attached to the October 31 letter from Arvest’s counsel. (Doc. 24-3, pp. 23-5-
24). Arvest’s counsel wrote a letter to the Debtors’ counsel on November 3, reminding him that
“[t]he documents were to have been signed, notarized where applicable and delivered to Arvest Bank
by Wednesday, November 2, 2011. They were not. If the documents are not properly executed and
delivered by 3:00 p.m. on Monday, November 7, 2011, then Arvest will consider Mr. Griffin in
breach of the Settlement Agreement and will prepare, file and prosecute to hearing motions to
compel Mr. Griffin and the Debtors performance.” Id.
On November 7, 2011, Arvest’s counsel sent the Debtors’ counsel an email reflecting the fact
that the Debtors had still not signed the settlement documents. Arvest’s counsel noted that, as of
November 7, Arvest’s offer to credit protection payments, including the recently-received protection
payment for November 2011, was conditioned on receiving “the deeds, judgments, release and
amount for Weed liens . . . no later than Wednesday, November 9, 2011 at noon.” Id. at p. 29.
The new deadline for the Debtors’ compliance, November 9, 2011, came and went, and
Arvest never received the completed settlement documents they requested. Instead, sometime on
November 9, the Debtors’ counsel sent Arvest’s counsel a lengthy email addressing ten discrete
“issues that need to be addressed in the documentation” and proposing “an alternative to trying to
work through the issues related to the documentation.” (Doc. 25-1, pp. 1-3).
Even though deadlines for completing the settlement had been by set by Arvest and missed
by the Debtors multiple times, it appears that Arvest persisted in offering the Debtors the incentive
of crediting the monthly protection payments in order to encourage a quicker resolution of all
outstanding matters. By letter on November 14, 2011, Arvest’s counsel again discussed the offer
of crediting the protection payments:
“Mr. Staed testified that Arvest was agreeable and willing to give the credits. The
Debtors have not performed. As the Court recognized in his ruling, which I have the
audio transcript, Arvest was not required to give credit of the For Cause payments to
the amounts under the Settlement Agreement. To resolve this matter and delivery of
all documents under the settlement, Arvest will agree to credit all of the For Cause
payments to the first Settlement payment of the $450,000, if and only if on or before
close of business on November 16, 2011: (1) all documents are fully executed and
delivered in form acceptable to Arvest; and (2) the weed liens on the Silver Leaf East
property are paid in full, including any additional interest that may accrue on or
before November 16, 2011.”
Id. at pp. 11-12.
With a new closing deadline of November 16, 2011, the Debtors made a settlement payment
to Arvest on November 14, 2011. Arvest observed that the payment was “short the sum of $11,398.”
Id. at p. 20. The following day, November 15, the Debtors made a final payment of all cash
contemplated by the settlement agreement, except that the Debtors subtracted the accumulated
protection payments from August 2011 to November 2011 from the total amount tendered to Arvest.
At that point, though the cash component had been paid, the documents required to be signed and
submitted to Arvest under the settlement still had not been released by the Debtors.
In a letter dated November 17, 2011, Arvest’s counsel objected to the Debtors having
prematurely assumed a credit for the monthly protection payments “even though the Debtors have
not yet fully performed.” Id. at p. 30. Arvest’s counsel then stated, “Arvest reserves the right to
demand payment of the credit amounts if we cannot reach a consensual closing,” and proceeded to
itemize the remaining settlement documents that had not yet been completed, including delivery of
certain warranty deeds and judgments. Id. Arvest set a new deadline of November 18, 2011, for the
Debtors to tender all remaining documents. In addition, Arvest threatened to file a motion to compel
in the bankruptcy court if the settlement were not completed by November 18. Id. at p. 31.
On November 18, 2011, Arvest’s counsel wrote an email to the Debtors’ counsel, noting the
Debtors’ failure to deliver the required settlement documents, and setting yet another closing
deadline of November 22, 2011. Id. at p. 33. Even though the settlement’s terms were still not
complete, and Arvest’s threat to file a motion to compel was still a possibility, Arvest’s counsel
stated in the email: “Arvest has already given Mr. Griffin a $56,000 credit [representing three
months worth of protection payments, from August to November 2011] to the cash payment under
the Settlement Agreement and wants all matters resolved for good . . . Thus, the settlement of the
fee application without adding more fees and costs to come to Fort Smith and hold a hearing is in
everyone’s interest.” Id. (emphasis added).
Arvest did, in fact, file a motion to compel on November 18, 2011, requesting that the
bankruptcy court enforce the settlement agreement. In the text of the motion, Arvest stated:
“Although not required to do so, Arvest granted the Debtors credits against the amount of cash due
under the settlement for the monthly adequate protection payments made since execution of the
Settlement Agreement.” (Doc. 11-10, p. 3) (emphasis added). But in the next sentence of the
motion, Arvest qualified that statement, noting that “ the Debtors have refused to deliver the required
‘warranty deeds.’” Id. Then, in the following paragraph, Arvest summarized its position as follows:
“The Debtors argue that since they made the cash payments, Arvest does not need the consent
judgments that are enforceable only if the Griffins do not perform. However, it is the Griffins’ very
failure to perform ALL of the terms of the Settlement Agreement that dictates the instant Motion to
Compel, and that likewise justifies Arvest’s demanding receipt of the consent judgments.” Id.
On December 7, 2011, Arvest explicitly and, it appears, finally retracted its offer to credit
the Debtors’ monthly protection payments, this time in open court during a hearing on Arvest’s
motion to compel. When given the opportunity to explain its views regarding the protection payment
credit, Arvest stated: “The debtors were told back in November that if we can’t get closed by date
certain, those credits are off, we’re not bound to do that, there is nothing contractually or under the
court order that requires that, and if we can’t get closed, those credits are off.” (Doc. 24-1, pp. 1011). Afterwards, the Debtors’ counsel responded “. . . this has just blown me away that they’re now
reneging on the deal about applying the adequate protection payments against the full amount of the
money that we paid.” Id. at p. 29. Arvest’s counsel confirmed that no credit would be given, and
then demanded: “We want the balance of our adequate protection money. Another [payment] is due
today.” Id. at p. 48.
On December 12, 2011, the bankruptcy court made a telephonic oral ruling granting Arvest’s
motion to compel. (Doc. 25-3). The court ordered that “ . . . the debtors shall have until noon on
Friday [December 16, 2011] to have executed and mail or deliver the documents to Arvest’s
counsel.” Id. at p. 4. Further, the court chastised the Debtors for their failure to complete the terms
of the settlement, finding that “ . . . these are things that really should have been executed before now
and should not have required Court intervention.” Id. At the time, the court made no ruling on the
claimed credit for monthly protection payments, as that issue had not been pled in Arvest’s original
motion to compel.
On December 16, 2011, the day of the court-imposed deadline to complete the terms of the
settlement, the Debtors delivered all remaining documents to Arvest. (Doc. 25-2, p. 1-2). The
Debtors did not pay December’s protection payment. On December 19, 2011, Arvest’s counsel
claimed in a letter to the Debtors’ counsel that Arvest had been “shorted” the amount of $70,524.502,
The Debtors have claimed this amount to be $70,254.90. The Court is without sufficient
information to determine which amount is correct. Since the Court is affirming the bankruptcy
court’s decision to deny the Debtors the credit/refund they request, the specific dollar amount at issue
the sum of five months worth of protection payments, from August to December 2011, and that
Arvest refused to credit the Debtors for these payments. (Doc. 11-6). The next day, on December
20, 2011, the Debtors filed a motion to compel Arvest to issue the credit. (Doc. 11-5).
On January 9, 2012, the bankruptcy court held a hearing on the matter of the Debtors’ motion
to compel. (Doc. 11-7). Shortly thereafter, on January 13, 2012, the court rendered an oral opinion
on Debtors’ motion, denying the Debtors’ request for the credit and stating the court’s opinion that
Arvest’s offer of credit was merely an unenforceable promise to give a gift, which lacked
consideration and contractual imprimatur, and thus could not be compelled by the court. (Doc. 118). A written order followed on February 7, 2012. (Doc. 11-1). The Debtors filed their Notice of
Appeal of the February 7 order on February 17, 2012. (Doc. 11-2).
II. Standard of Review
According to Fed. R. Bankr. P. 8013, a U.S. District Court reviewing a U.S. Bankruptcy
Court’s order on appeal adopts the following standard of review:
“Findings of fact, whether based on oral or documentary evidence, shall not be set aside
unless clearly erroneous, and due regard shall be given to the opportunity of the bankruptcy
court to judge the credibility of witnesses.”
The Eighth Circuit has further elaborated that while findings of fact are to be evaluated only
for clear error, all legal determinations made by the bankruptcy court are to be reviewed de novo.
Wegner v. Grunewaldt, 821 F.2d 1317, 1320 (8th Cir. 1987). A factual finding is clearly erroneous
“when although there is evidence to support it, the reviewing court on the entire evidence is left with
the definite and firm conviction that a mistake has been committed.” Anderson v. City of Bessemer
is of no moment here, as the parties will remain in the same financial position they were in prior to
City, N.C., 470 U.S. 564, 573 (1985) (quoting United States v. United States Gypsum Co., 333 U.S.
The only issue for this Court to resolve on appeal is a matter of basic contract law: was
Arvest contractually obligated to issue a credit to the Debtors, or, in the alternative, did Arvest give
the Debtors a completed gift of credit that could no longer be revoked? As explained more fully
below, the Court finds that Arvest and the Debtors did not enter into a contract that required Arvest
to credit the Debtors’ monthly protection payments against the parties’ cash settlement. The monthly
payments were legally owed to Arvest, pursuant to court order, and the Debtors gave no separate
consideration that would create a contractual obligation for Arvest to issue a credit. Instead, Arvest
made the Debtors a promise to give a conditional gift of credit, which was unenforceable as long as
the conditions attached to the gift remained unsatisfied and the gift were not delivered. The Court
concludes that, in the end, the Debtors never satisfied the gift’s conditions, and Arvest never
delivered a completed gift. Accordingly, the bankruptcy court’s order denying the Debtors’ motion
to compel payment of the credit is affirmed, and the Debtors’ appeal is denied.
A. Arvest Did Not Enter into a Contract to Issue a Credit
The first issue to determine on appeal is whether the parties entered into a valid contract
requiring Arvest to issue a credit to the Debtors for several months of court-ordered protection
payments. After reviewing the record and all legal determinations of the bankruptcy court de novo,
it is clear that the Debtors did not provide consideration in exchange for Arvest’s promise to issue
the credit. Without consideration, Arvest was not contractually obligated to issue the credit.
A brief review of the facts surrounding the bankruptcy court’s imposition of the protection
payments is needed. Originally, in December of 2010, the bankruptcy court ordered the Debtors to
make monthly protection payments because “Arvest Bank ha[d] been frustrated in its efforts to
collect payment of its loan to Debtor[s].” (Doc. 9-1, p. 2). As a consequence, the court ordered the
Debtors to pay Arvest a monthly protection payment – a payment separate and apart from any other
financial obligation owed by the Debtors to Arvest – “until Debtor[s’] plan of reorganization is
confirmed.” Id. Unless the Debtors demonstrated their good faith by paying monthly amounts to
Arvest, the bankruptcy court would lift the automatic stay and allow Arvest to pursue collection
actions against the bankrupt estates.
Approximately eight months after the protection payments were first ordered and a month
after the parties signed a settlement agreement, the bankruptcy court instructed the Debtors to
continue making monthly protection payments to Arvest “until this thing gets resolved.” (Doc. 12-7,
p. 69). The court’s comments on the record at the hearing held on September 7, 2011 show that the
court intended the monthly payments 1) to continue, despite the fact that the parties had entered into
a settlement agreement the previous month, and 2) to be separate from any financial obligations
contemplated by the parties’ settlement agreement. Id. After noting that the Debtors had failed to
make their monthly payments in August and September of 2011, the court admonished, “[h]ad these
adequate protection payments been made as ordered by the Court, we wouldn’t be here today. There
was nothing in the agreement that forgave that.” Id. at p. 69.
Arkansas law states that when a party pays a sum it is legally bound to pay, such payment
cannot constitute valid consideration creating a new contractual obligation. Holmes v. Thompson,
240 Ark. 818 (Ark. 1966) (citing Killough v. Payne, 52 Ark. 174 (Ark. 1889)). Moreover, when a
party to a contract attempts to enter into an additional contract, and no added benefit is received by
the obligee except what he was entitled to under the original contract, while the obligor parts with
nothing except what he was already bound for, there is no consideration to support the additional
contract. Feldman v. Fox, 163 S.W. 766 (Ark. 1914); Capel v. Allstate Ins. Co., 77 S.W.3d 533, 541
(Ark. Ct. App. 2002) (“Additional consideration is required when parties of a contract enter into an
Here, the Debtors’ court-ordered protection payments were explicitly deemed by the
bankruptcy court to be separate from the obligations owed under the settlement agreement.
Accordingly, fresh consideration would have been required of the Debtors in order to transform
Arvest’s promise of credit into a binding contract, as Arvest was legally entitled to receive the
protection payments as well certain items agreed to under the settlement, including cash payments
and documentation associated with the transfer of property, free of all liens and encumbrances. See
Doc. 11-4. Since no new consideration was given, no contract existed.
B. Arvest Was Legally Entitled to Monthly Payments from August to December 2011
The Debtors’ next argument on appeal is that, despite the bankruptcy court’s orders to the
contrary, Arvest had no legal entitlement to continue receiving monthly payments after the court
approved the parties’ settlement, “because the Settlement Agreement extinguished everything Debtor
owed to Arvest as of the Settlement Agreement Effective Date.” (Doc. 10, p. 27).
The Debtors have overlooked the fact that Arvest’s legal entitlement to receive monthly
payments was a matter entirely in the discretion of the bankruptcy court. It was the bankruptcy court
that ordered the payments to commence in the first place, and it was the bankruptcy court’s decision
as to when such payments could and should cease. The court’s December 14, 2010 order, which set
forth the terms of the monthly protection payments, explicitly stated that they would continue “until
Debtor[s’] plan of reorganization is confirmed.” (Doc. 9-1). The order did not state that payments
would conclude when the parties signed a settlement or when the court approved a settlement.
Furthermore, nothing in the record would lead this Court to conclude that the parties submitted a
“plan of reorganization” to the bankruptcy court at any point prior to the filing of the instant appeal.
What is evident from the record is that the first time the Debtors attempted to stop paying
monthly protection payments, in August of 2011, the bankruptcy court ordered the payments to
continue. During a hearing on September 7, 2011, a month prior to court approval of the parties’
settlement agreement, the bankruptcy court made a ruling that monthly payments were owed for both
August and September of 2011 and must continue to be paid until the court deemed the settlement
and its attending obligations “resolved.” (Doc. 12-7, p. 69). The following excerpt from the court’s
September 7 hearing makes quite plain the court’s position on the matter:
“ . . . the debtor should be required to continue making payments, most
fundamentally, because there’s an order of the court that says that. That’s what
you’re supposed to do. You just don’t – you can’t ignore orders of the court without
getting permission of the Court to amend them. You can’t assume that it’s okay and
you worked a deal and therefore the Court doesn’t – you’re not going to pay any
attention to the orders of the court anymore.”
Id. at pp. 69-70.
When the Debtors filed their motion to compel Arvest to credit them for their August to
December 2011 payments, the court reminded the parties that it had ordered the payments to
continue past the official settlement date in order to compensate Arvest “for the time value of money
Arvest was losing” due to the Debtors’ delay in finalizing the settlement. (Doc. 11-8, p. 6). The
court then imposed a final deadline of December 16, 2011, for the Debtors to deliver all remaining
documents and close the settlement, and, in fact, the record reflects that the settlement’s terms were
not completed until that date. (Docs. 25-2 and 25-3). It follows that although the settlement was
signed by the parties in August of 2011, and the bankruptcy court approved the settlement in October
of 2011, the settlement was not finally “resolved” until after the December 7, 2011 protection
payment was due. Therefore, by the authority vested in the bankruptcy court and its orders, Arvest
was legally entitled to monthly payments from August to December 2011.
C. Arvest’s Promise of a Credit Was a Conditional Gift That Was Never Completed
The Debtors’ last point on appeal is that, if the credit were merely a gift not subject to
contractual obligations, that gift was completed and remains irrevocable. Arkansas law provides that
in order to make a valid gift, “it must be proven by clear and convincing evidence that (1) the donee
was of sound mind; (2) an actual delivery of the property took place; (3) the donor clearly intended
to make an immediate, present, and final gift; (4) the donor unconditionally released all future
dominion and control over the property; and (5) the donee accepted the gift.” Wright v. Union Nat’l
Bank of Arkansas, 307 Ark. 301, 304 (Ark. 1991) (citing Phipps v. Wilson, 251 Ark. 377 (Ark.
Of the five requirements for a valid gift listed above, the third requirement of donor intent
to make an immediate gift, and the fourth requirement of unconditional release of future dominion
and control over the property, are most relevant in deciding the legal issue now before the Court.
The parties cannot dispute that Arvest’s promise to give a gift of credit persisted in many forms,
accompanied by deadlines and other conditions, over the course of several months of contentious
negotiations. The offer of the gift was made and withdrawn repeatedly, due to the Debtors’ nonperformance of the conditions Arvest attached to the gift. (Doc. 24-3, pp. 3, 19-20, 23-24, and 29;
Doc. 25-1, pp. 11-12, 30 and 33).
In reviewing the bankruptcy court’s factual findings regarding the lack of delivery and
unconditional release of the gift, the Court believes that no clear error was committed. The Court
agrees with the bankruptcy court that Arvest’s offer of a gift of credit was gratuitous and conditional,
and in any event was never a completed gift due to the Debtors’ failure to satisfy Arvest’s conditions.
“It is not enough that a purported donor intend to make a gift, or . . . that the donor take actions that
may support the view that he intended for a purported donee to have his property.” Jamison v. Estate
of Goodlett, 56 Ark. App. 71, 81 (Ark. Ct. App. 1997). What the law requires is that the donor of
a gift clearly intend to make an immediate, present final gift and unconditionally release all future
dominion and control over the property. Id. The Court finds that neither of these prerequisites
occurred in the case at bar, as Arvest consistently placed conditions on the gift and never manifested
a clear intent to make an immediate gift without conditions.
The conditions that Arvest placed upon the gift of credit were straightforward, and as stated
above, consistent with each written offer of the gift from October through November 2011. The gift
was offered in the first place as an incentive to the Debtors to complete the requirements of the
parties’ settlement according to Arvest’s interpretation of the settlement’s terms and according to
Arvest’s timetable. See Docs. 12-6 and 12-7. At no point were the Debtors required by the
bankruptcy court to comply with Arvest’s deadlines and restrictions; the deadlines were established
by Arvest for the purpose of completing the settlement in the manner Arvest desired. The Debtors,
for their part, refused to comply with Arvest’s conditions on the gift by ignoring Arvest’s deadlines,
taking issue with the wording of documents, refusing to sign releases, failing to deliver warranty
deeds, and questioning whether payments should be made according to the amounts designated by
Arvest. See, e.g., Doc. 25-1, pp. 1-2.
As the giver of the gift, it was in Arvest’s discretion to determine whether the conditions it
attached to the gift were met, and here, the Debtors steadfastly refused to meet Arvest’s conditions,
to the point that court intervention was required in December 2011 to compel the Debtors to deliver
the documents needed to complete the settlement. (Doc. 25-3, p. 4). Nevertheless, the Debtors point
to two documents generated by Arvest’s counsel which they contend prove that Arvest’s gift was
completed and delivered: first, an email written on November 18, 2011, in which Arvest’s counsel
stated, “Arvest has already given Mr. Griffin a $56,000 credit . . .” (Doc. 25-1, p. 33) (emphasis
added); second, a sentence in Arvest’s November 18 motion to compel, which noted, “Arvest
granted the Debtors credits . . .” (Doc. 11-10, p. 3) (emphasis added).
When examining the context of these two statements by Arvest, it is clear that they do not
manifest a sudden acquiescence on Arvest’s part to remove the conditions it originally placed on the
gift. Rather, they appear to be statements intended to encourage the Debtors to fulfill the gift’s
conditions, and/or remind the Debtors that the promise of the gift had been offered and was
potentially still available. Both statements refer to the credit as though it had already been given;
however, the inquiry cannot end there. The email from which the first statement was taken and the
motion from which the second statement was taken must be read in their entirety in order to
determine whether Arvest truly intended to give a completed gift.
Beginning with the November 18 email from Arvest’s counsel, it appears that he wrote about
the gift as “already given” in one paragraph of the letter; but in a different paragraph, he threatened
to file a motion to compel against the Debtors for failing to complete closing documents in a timely
fashion. In the context of the email as a whole, the “already given” term functions as an incentive
to the Debtors to comply with Arvest’s conditions or face the consequence of answering Arvest’s
motion to compel and appearing before the bankruptcy court. (Doc. 25-1, p. 33). In similar fashion,
although it appears that one line of Arvest’s November 18 motion to compel refers to the gift of
credit as “granted,” the following line highlights that Arvest was “not required” to give the gift, and
the remainder of the motion enumerates the various ways that the Debtors have failed to close on the
settlement in a timely manner. (Doc. 11-10, p. 3).
A review of the voluminous record in this case confirms the Court’s view that, both before
and after November 18, 2011, Arvest placed conditions on its gift of credit that were never fulfilled
by the Debtors. In arguing that Arvest’s gift was actually completed and delivered, the Debtors have
simply plucked several words out of two documents written by Arvest’s counsel on a single day,
hoping that those words can now be used to lock Arvest into a promise to give the Debtors a
gratuitous gift. It is not credible that a gift that was so hotly contested by the parties could be
deemed delivered and completed by this evidence alone. Arkansas law requires that there be a clear
manifestation of the immediate, present, and final nature of the gift, and that the gift be
unconditionally released by the donor and actually delivered to the donee. Wright, 307 Ark. at 304.
Such a manifestation was not found by the bankruptcy court, and such is not found by this Court.
After reviewing the parties’ briefs, the record, and the bankruptcy court’s conclusions of law
de novo, the Court finds that the determination of the bankruptcy court with respect to the issue on
appeal is AFFIRMED. The Court’s findings are as follows: first, Arvest’s offer to issue a credit to
the Debtors for monthly protection payments, from August 2011 to December 2011, was an
unenforceable promise to give a gift, rather than a contract; second, Arvest was legally entitled to
monthly protection payments by virtue of the bankruptcy court’s order of December 14, 2010,
requiring that payments commence, and by the court’s later order of September 7, 2011, requiring
that payments continue until the court deemed the matter resolved or until the Debtors’ plan of
reorganization was confirmed; third, the Debtors failed to prove that the bankruptcy court’s findings
of fact were clearly erroneous and that Arvest made an immediate, present, final, and unconditional
gift of credit. Accordingly, the judgment of the bankruptcy court is affirmed, and this appeal is
IT IS SO ORDERED this 21st day of September, 2012.
/s/P. K. Holmes, III
P.K. HOLMES, III
CHIEF U.S. DISTRICT JUDGE